Paramount to pay $122.5 million to settle shareholder lawsuit over Viacom-CBS merger in 2019

Paramount Global agreed to pay $122.5 million to settle a 2019 lawsuit filed by Viacom shareholders over the company’s 2019 merger with CBS.

The settlement was disclosed in an SEC filing on Friday. In the filing (read it HERE), the company provides the chronology of the case brought before the Delaware Chancery Court. After announcing the settlement amount, the company notes that the company is taking legal action against insurance companies in connection with the case, although an exact amount of damages has not been disclosed.

“The company is currently involved in an insurance lawsuit against certain of its insurance carriers in the Superior Court of the State of Delaware,” the filing states. “The company intends to vigorously pursue its claims. Pending recovery of those insurance proceeds, the Company will advance funds for the Settlement when due.”

The settlement requires the approval of a judge in the Delaware Chancery Court.

In the lawsuit, shareholders led by the California Public Employees Retirement Fund (CalPERS) alleged that Paramount Chairman Shari Redstone breached her duty of loyalty by persuading allies to push through the Viacom-CBS merger at the expense of investors . Her motivation, according to the lawsuit, was to achieve “media mogul” status, much like her father, the late Sumner Redstone.

A Paramount representative declined to comment beyond the material in the filing, including the lawsuit against insurers.

A Delaware Chancery Court judge denied the company’s motion to dismiss the lawsuit in December 2020. Vice Chancellor Joseph R. Slights III, the judge in the case, said “well-established facts regarding the plaintiffs’ prior robberies” and their “direct involvement in merger negotiations” were sufficient to proceed with the case.

While boards tend to prevail in such cases when there is doubt, Sights noted that the Delaware court is “more suspicious when the trustee interested in a transaction is a controlling shareholder.” The judge dismissed allegations of breach of fiduciary duty against ViacomCBS CEO Bob Bakish (now CEO of Paramount), saying no evidence had been presented.

The Delaware Chancery Court, which does not use a grand jury, is the venue for many corporate and shareholder lawsuits since most corporations are incorporated there.

Paramount has been operating as a unified entity for more than three years following the completion of the CBS-Viacom merger in December 2019. However, it hasn’t fully emerged from the tumultuous 2010s. While Viacom and CBS were both controlled by National Amusements, the media company built by Sumner Redstone and then run by Shari Redstone, the two companies were run differently and their respective leaders frequently clashed. The final stages of disgraced former CBS CEO Les Moonves’ tenure exposed these tensions and led to a flurry of lawsuits.